Much of Ominto’s revenue depends on recruits. The unprofitable company says as much in SEC filings:
“Success of our DubLi Network business is dependent on the ability and productivity of our Business Associates.
Our DubLi.com revenues are generated through the efforts of our network of Business Associates (our independent marketing representatives) whose drive individual consumer traffic and business client’s customers traffic to the DubLi.com shopping site. DubLi.com is the product of DubLi Network and, as such, requires the network to penetrate consumer registrations. To increase our revenues, we must increase the productivity of this network. Therefore, our success depends, in significant part, upon our ability to recruit, educate, retain and motivate our Business Associates and their ability to expand their organization network and to generate customers who shop at our shopping portal. Our operating results could be harmed if our existing and new business opportunities do not generate sufficient interest to retain and motivate existing Business Associates and attract new Business Associates; or if we fail to educate them about our products in ways that ensure their success or if we fail to properly support them in their efforts.”
“The increase was primarily due to an increase in: (i) business license fees from Business Associates as a result of a higher volume of registrations under the program; and (ii) membership subscription fees from increased sales of VIP memberships.”
So let’s look more closely at last quarter’s revenue.
First, most revenue – $4.9 million – came in from “membership subscription fees” and “commission income.”
(Source: Company SEC filing)
Associates are required to buy promotional packages that are resold to customers … recruits also must buy “membership subscription products” to be resold to other associates.
Ominto lumps in “commission income,” which is apparently miniscule and paid by merchants who use the company shopping website.
The second source of revenue is “business license fees.”
(Source: Company SEC filing)
Once again, associates pay these fees: “Business license fees are paid by our BAs and our Partner Program participants. The fees from BAs enable them to sell our products.”
Ominto also charges recruits a marketing and training “setup fee:”
“Business Associates (BAs) pay an initial business license fee and Partner Program participants (excluding not-for-profit organizations) pay a setup fee for the marketing and training services provided by us which enables them to begin their sales of DubLi.com’s products and services.”
Third is “advertising and marketing programs.”
Once again, recruits at the first and second level pay the company this money.
The fees recruits pay – business license, subscription and advertising/marketing – must be paid in advance.